For routine inventory management on the Amazon platform, many online sellers use the Amazon Inventory Management tool. For the smallest sellers, it may do the job – especially if they are only selling on a single channel. Small businesses, medium-sized businesses, and large-scale operations may find they need more robust tools that can handle other aspects besides just Amazon inventory management.
Most eCommerce sellers are selling across multiple platforms and sales channels. Even if you are using Amazon’s Seller Central dashboard and its inventory tools, you’re still managing other systems on other platforms. It can eat up a lot of time and quickly lead to inaccurate stock counts if you aren’t diligent in keeping everything straight.
Amazon is the largest online retailer in the world and accounts for $280 billion in revenue. Nearly half of the revenue came from third-party sellers. In the past year alone, more than a million new sellers signed up to do business with Amazon. Amazon makes it easy for small and medium-sized businesses to get their products in front of people and will even handle fulfillment for a fee.
For multichannel sellers, they need an inventory management system that handles all of their inventory across every channel. Even for those selling only on Amazon, tying your inventory management system to warehouse software, order tracking, and supply chains can create significant efficiencies that the Amazon inventory management tools alone can’t handle.
What is Amazon Inventory Management?
There are two inventory options through Amazon. You can use Fulfillment by Amazon (FBA) or Do-It-Yourself (DIY). FBA handles the transactions, tells you where to send the product, and then manages distribution through its fulfillment location. A second option is to do the fulfillment yourself, where you manage the supply chain and distribution.
If you’re only selling through Amazon, using Amazon inventory management can work well to manage your online inventory. However, it won’t do so well when it comes to managing your warehouse, managing your multichannel selling, or handling your supply chain.
Why Is Amazon Inventory Management Important?
Like on any sales platform, keeping your inventory current and accurate is the key to happy customers. If you run out of stock, or are unable to fulfill orders, your customers head right to you competitors.
Not having enough inventory on hand costs you sales. Having too much inventory ties up capital and adds to storage costs. If items don’t sell, you could wind up with dead stock or have to take markdown to get rid of it.
The majority of top marketplace sellers on Amazon use FBA to handle fulfillment. It’s the right option for many, but not for everyone. There are pros and cons to using FBA.
The Pros and Cons of FBA
If you’re looking for a hands-off approach to fulfillment, FBA has some advantages. It handles products through delivery. Because Amazon is one of the biggest shippers in the world, it may be cheaper to ship products with faster delivery times.
FBA works like this:
- You send your products to Amazon
- They store it for you
- When someone orders it, Amazon picks, packs, and ships it to the customer
Amazon will also handle the returns and refunds. It can make things simpler, but it also comes at a price. There are increased fees for handling the fulfillment that can range from a couple of dollars to a couple of hundreds depending on the type, size, and weight of the item. There are also long-term storage fees for products that sit on warehouse shelves, and minimum stocking levels. Meeting those stock levels might mean tying up cash to put products in Amazon warehouses rather than in other areas of your business.
Storage fees at Amazon are rising. In the 4th quarter of 2019, storage fees for standard items jumped from 69 cents per cubic foot to $2.40 per cubic foot – a 247% increase!
Handling your inventory and fulfillment yourself lets you control the relationship with the customer directly. There are fewer fees and higher margins. You’re responsible for the fulfillment and you control the inventory levels.
Whether you use Amazon FBA or do fulfillment yourself, managing your inventory is crucial. Your inventory management system (IMS) needs to manage your inventory and generate the data you need to integrate into Amazon inventory management systems.
How to Do a Better Job of Amazon Inventory Management
Amazon lets sellers manage their inventory through their Seller Central web interface. Each product sold through Amazon can have inventory listed in four categories in the interface:
- Available: the current quantity available to ship to customers
- Inbound: The amount of product that is scheduled for shipping, in-transit, or currently being processed at Amazon fulfillment center
- Unfulfillable: Inventory that is in an Amazon fulfillment center but not is currently able to be sold, such as damaged goods or items requiring inspection
- Reserved: Items that are being received at the fulfillment center, associated with a current order, or in transit to another warehouse facility.
Doing a better job of Amazon inventory management means constant updating, tweaking, and analyzing inventory levels through the Amazon inventory management tool. That’s not as easy as it sounds, especially if you are selling in other places.
Even if you are satisfied with the Amazon inventory management tool, there are good reasons to use a more robust solution, such as SkuVault, for your inventory management. Here are a few such reasons:
Amazon is Your Friend (and Possibly Your Enemy)
Amazon can bring sales to you that you wouldn’t have without them. More than 2 billion visitors each month go to the site. Two-thirds of online shoppers start their product search at Amazon. That’s twice as many that start searching on Google or other search engines and 16X the number that will go directly to brand websites.
Amazon can be your friend, but it can also be your enemy. If you have difficulty with Amazon practices or if they add requirements you can’t meet, the business can disappear instantly. A survey of Amazon sellers showed their greatest fear was that Amazon could take away their seller privileges.
Amazon Can Change the Rules (And Does)
Amazon can change the rules at any time. The online marketplace has announced, for example, the sellers of small and light items that use FBA will see cost increases. Items larger than 10 ounces or $7 will be converted to standard FB fees. That may cut your profit margins significantly.
When the coronavirus pandemic hit, Amazon prioritized sales of essential goods to meet the increased demand. They focused their internal resources to handle essential items.
This meant sellers using FBA services were unable to fulfill orders. It may have been a necessary move by Amazon to help get essential items to consumers, but it shut down many ecommerce sellers who had to lay off staff or shut down operations. For many, it had them questioning whether it would be better to internalize their inventory rather than rely on Amazon.
You’re Probably Selling on More Than Just Amazon
If you’re selling online, you’re probably doing it on more than just Amazon. You’re probably making products available on your website along with a number of additional platforms. If not, you should be. Multichannel customers spend 3X more than single-channel shoppers. They also have a 30% higher lifetime value.
If you are managing your inventory through Amazon, you may be missing opportunities with other sellers. An independent inventory management system that can handle multichannel inventory and your supply chain will be the most efficient way to do business.
You Still Have to Handle the Supply Chain and Warehouse Operations Separately
Even if you’re happy with Amazon inventory management, it has limitations. You’re still going to need to handle your vendors and supply chain.
When COVID-19 started taking its toll in China, it dramatically increased lead times. Many overseas suppliers were unable to provide stock items. Even with dual sourcing, many retailers were left with disappointed customers and unfulfilled orders. Amazon inventory management tools aren’t going to help with supply chain disruptions.
The right inventory management software can help you adapt more easily to supply chain disruptions. It can track multiple vendors and allow you to easily adjust the lead time, safety stock, minimum order levels, and prepopulate purchase orders. Automatic reordering can alert you when vendors are unable to fulfill orders on the timetable you need so you can look for alternate sources.
Complete Integration with Amazon Inventory Management
Using ecommerce Inventory Management Software (IMS) like SkuVault provides complete integration with Amazon Inventory Management. It also helps you easily manage your multichannel inventory and warehouse operations in a way that Amazon can’t do. This helps fulfill orders more promptly while reducing errors and lowering your operating costs.
Just ask SkuVault’s customers: companies that use SkuVault report 87% faster fulfillment, 90% fewer out of stocks, and 83% fewer mis-ships.
SkuVault can handle your Amazon inventory needs and it can also integrate with your favorite ecommerce solutions, including:
- And more
SkuVault ecommerce IMS helps you sync all of your sales channels, track your online inventory, and generate the data you need to manage your supply chain in one easy-to-use interface. This gives you complete visibility into every facet of your inventory, including replenishing Amazon FBA orders with a simple button click.
Better Manage Quality Control on Amazon
Another major concern for Amazon sellers is their Performance Rating. Seller ratings appear alongside third-party sellers’ names on the platform. Poor reviews can make customers hesitate to do business with you. If there are problems with order defects, pre-fulfillment cancellation rates, or late shipments, or negative feedback, it can cause seller ratings to drop. Amazon sellers with poor performance scores can be suspended or blocked.
At the very least, poor reviews or performance scores can lower your ranking within Amazon when someone searches. That’s bad news. 70% of Amazon shoppers never make it past the first page of listings. If you get pushed down the list because of performance problems, it’s going to hurt your sales. 81% of click are on items listed on the first page of Amazon search results. If you drop off the first page, it can be a killer.
Managing your FBA inventory, preventing overselling, and closely monitoring inventory in your FBA warehouses can help you maintain positive performance ratings. SkuVault helps you establish strong quality control processes to make sure your order fulfillment is done right. By automating the warehouse picking process, your warehouse inventory is easier to track and errors are minimized. You’ll find what needs to be picked and where to get it fast.
- Interactive Wave Picking
- Automatic Pick Lists
- Efficient Pick Locations
SkuVault provides paperless pick lists that work with barcode scanners for more accurate picking. This helps reduce mistakes like mis-picks and mis-ships. It lowers your customer service and support costs while improving your Amazon Seller Performance Ratings.
Travel time in warehouses is reduced when SkuVault automatically optimizes pick routes. This makes your entire operation more efficient.
These benefits are just as important if you are doing fulfillment yourself for Amazon or other multichannel sales.
Improved Demand Planning and Forecasting on Amazon
Effectively meeting customer demand on Amazon (and any ecommerce platform) begins with making smarter purchasing decisions. To do that, you have to understand your sales history and sales cycles to make educated purchases and better ordering decisions. This way, you stay ahead of the pack when it comes to buying trends and can be assured that you have the right items in stock at the right time.
Smart reporting allows you to make data-driven decisions and have full knowledge of what stock needs to be replenished in your warehouses. SkuVault also provides you with clear insights into user accountability, information about transaction quantity changes, and when you need to create a new PO to your suppliers. This information syncs across your channels and platforms and is available to you in real-time.
SkuVault’s Warehouse Management System can pull orders and invoices into your shipping software, such as ShipWorks or ShipStation, and generate efficient pick lists. SkuVault can sync order status and weight. This eliminates manual updating against marketplaces for more efficient shopping.
If you are utilizing FBA for your shipments, SkuVault eliminates the need to go back and forth and do manual verification. You can utilize SkuVault’s Replenishment Report to easily generate a Purchase Order or pick list and Create an FBA Shipment with the click of a button. SkuVault utilizes an open API with Amazon’s Seller Central API to return the data customers need to make purchasing decisions.
You no longer have to leave SkuVault and bounce back and forth between Amazon to replenish shipments. SkuVault sends the information to Amazon for what users want to ship, and Amazon sends back the order/pick list information. Additionally, you can easily scan to verify the correct quantities are in each shipment for each FBA warehouse.
Common Questions about Amazon Inventory Management
Here are some of the more common questions sellers have about Amazon inventory management.
Using SkuVault, can I connect my store inventory to Amazon?
SkuVault can manage all of your inventory regardless of where you sell it. By constantly syncing data across all sales channels, you’ll always know exactly how much inventory you have on hand to sell, when you need to reorder, and how much stock to keep to continue to sell until your stock gets replenished.
What helps my inventory rank higher on Amazon?
Amazon’s goal isn’t fundamentally different than yours. It wants to maximize revenue per customer. So do you! Amazon has found that when buyers can quickly find the most relevant product from the highest-quality sellers, customers are more likely to buy, spend more, and return to the site. So, they take seller rankings very seriously.
Failing to deliver products on time, out-of-stocks, and high return rates can drive down your seller rating. The algorithm they use to determine seller ranking is proprietary, but here are some of the more important things that impact the rankings:
- Sales volume
- Customer reviews
- Low return rates
- Order processing speed
- In-stock rate
- POP (Perfect Order Percentage)
- ODR (Order Defect Rate)
As you can see, an efficient inventory management system has a direct impact on your Amazon seller ratings. It’s all about taking care of your customers.
If you’re only selling a few items on Amazon, using the online retailer’s Amazon inventory management tool may work just fine. If you’re selling a large number of SKUs, doing a significant volume, or sell on multiple sales platforms, you need a more robust inventory management system to do a better job of managing your inventory wherever you sell it.
If you’re interested in meeting customer demand with better Amazon inventory management, the experts at SkuVault are happy to provide you with a personal demo and show you how SkuVault inventory management software can improve your total operation.